The most common question we get about Google Ads is: "How much should I spend?"
The wrong answer is "Let's throw ₹10,000 at it and see what happens." The right answer involves basic math based on your business metrics.
Step 1: Know Your Numbers
Before you run a single ad, you need to know three things:
- Average Order Value (AOV): How much is a typical customer worth to you in their first year?
- Profit Margin: What percentage of that AOV is actual profit?
- Close Rate: If you get 10 qualified leads on the phone, how many become paying customers?
Step 2: Calculate Your Max Cost Per Lead (CPL)
Let's say your average customer brings in ₹50,000 in profit, and you close 1 out of every 5 leads (a 20% close rate).
That means to get 1 customer (₹50,000 profit), you need 5 leads. To break even, you could spend up to ₹10,000 per lead (₹50,000 / 5). But you don't want to break even—you want a 3x ROI. So your target Cost Per Lead (CPL) should be around ₹3,333.
Step 3: Factor in Cost Per Click (CPC) and Conversion Rate
If your target CPL is ₹3,333, and your landing page converts 10% of visitors into leads, you need 10 clicks to get 1 lead.
That means you can afford to pay up to ₹333 per click.
If the average CPC in your industry is ₹500, Google Ads might not be profitable for you unless you either increase your prices, increase your close rate, or improve your landing page conversion rate.
The Starting Budget Recommendation
For most local service businesses in India, we recommend a starting ad spend budget of ₹20,000 - ₹30,000 per month. This provides enough data for Google's machine learning algorithms to optimize your campaigns effectively.
At Altezza, we handle all the math for you. We track every click, every lead, and every rupee to ensure your campaigns are generating a positive return on investment.